Understanding Share Transmission Due to Death or Insolvency in Zimbabwe

Introduction

In Zimbabwe, the ownership of company shares can change hands through two main processes: share transfer and share transmission. While a share transfer is a voluntary act—such as selling or gifting shares—a share transmission happens by operation of law, typically due to the death or insolvency of a shareholder. Understanding how share transmission works is essential for company directors, heirs, legal representatives, and anyone involved in the administration of estates or insolvent companies. This article explains the share transmission process in Zimbabwe, focusing on what happens when a shareholder dies or is declared insolvent, and outlines the steps required to ensure compliance with local company law.

Share transmission is the legal process by which shares are transferred from a deceased or insolvent shareholder to their legal heirs, executor, administrator, or an appointed receiver. Unlike a share transfer, which is initiated by the shareholder, share transmission occurs automatically as a result of law, without the need for a sale or agreement between parties.

The process is governed by the Companies and Other Business Entities Act (COBE) and is further guided by the company’s articles of association. The law ensures that shares do not remain in limbo after a shareholder’s death or insolvency, protecting the rights of both the company and the rightful recipients.

When a shareholder passes away, their shares become part of their estate. The following steps outline the typical process for share transmission due to death in Zimbabwe:

Notification of Death: The company secretary or board must be formally notified of the shareholder’s death, usually by the deceased’s family, executor, or legal representative.

Submission of Legal Documents: The executor or administrator must provide key documents, including:

A certified copy of the death certificate
Grant of probate (if there is a will) or letters of administration (if there is no will)
The original share certificate (if applicable)
Proof of identity of the executor or administrator

Board Approval and Register Update: The company’s board of directors reviews the submitted documents. Once satisfied, they approve the transmission and update the company’s share register to reflect the new legal owner. A new share certificate is issued in the name of the executor or beneficiary.

Transfer to Beneficiaries: The executor or administrator may subsequently transfer the shares to the rightful heirs as specified in the will or according to the laws of intestate succession. This step may require additional paperwork and, in some cases, payment of estate duty or inheritance tax.

If a shareholder is declared insolvent (bankrupt), their shares are managed by an appointed receiver or liquidator. The process is as follows:

Notification of Insolvency: The company is notified by the court-appointed receiver or liquidator.

Submission of Legal Documents: The receiver provides:

A certified copy of the insolvency order
Appointment documents for the receiver or liquidator
The original share certificate (if available)

Board Approval and Register Update: The board verifies the documents, approves the transmission, and updates the share register to reflect the receiver or liquidator as the new shareholder.

Disposition of Shares: The receiver may sell or otherwise dispose of the shares to settle the insolvent shareholder’s debts, following the procedures set out in the insolvency laws and the company’s articles of association.

Initiation: Share transmission is automatic by law, while share transfer is voluntary.
Documentation: Transmission requires legal documents such as a death certificate or insolvency order; transfer requires a share transfer form and sale agreement.
Tax Implications: Capital gains tax does not apply to share transmission, but estate duty or inheritance tax may be due.
Company Role: The company must recognize the legal successor in a transmission, while it can exercise discretion in a transfer.

Review the Company’s Articles: Some companies may have specific provisions regarding the transmission of shares, such as requiring board approval or imposing restrictions on who can become a shareholder.

Maintain Accurate Records: Keeping the share register updated is crucial for legal compliance and for protecting the rights of all parties involved.

Seek Legal and Professional Advice: Executors, administrators, and receivers should consult with legal professionals to ensure all requirements are met and to avoid disputes.

Tax Compliance: While capital gains tax is generally not applicable, estate duty or inheritance tax may be payable. It’s important to consult the Zimbabwe Revenue Authority (ZIMRA) or a tax advisor to understand your obligations.

Frequently Asked Questions

Can shares be transmitted to a minor? Yes, but the shares will usually be held in trust by a guardian or trustee until the minor reaches the age of majority.

How long does the share transmission process take? The duration depends on how quickly the required legal documents are obtained and submitted. Delays can occur if there are disputes over the estate or if documentation is incomplete.

Is board approval always required? Most companies require board approval to update the share register, but this is generally a formality once all legal documents are in order.

Conclusion

Understanding share transmission due to death or insolvency in Zimbabwe is essential for ensuring a smooth and compliant change in share ownership. The process is designed to protect the interests of both companies and beneficiaries, but it requires careful attention to legal documentation and company procedures. By following the correct steps and seeking professional guidance, executors, administrators, and receivers can ensure that shares are transmitted efficiently and in accordance with Zimbabwean law.

For more information on share transmission and company law in Zimbabwe, consider consulting a qualified company secretary, lawyer, or visiting the Zimbabwe Stock Exchange official website.